FRIDAY, April 8 (HealthDay News) -- Starting this year, Medicare
Part D's widely despised "donut hole" -- the gap in drug cost
coverage enrollees encounter when they reach a certain spending
threshold -- will start to disappear, one result of the health care
reform package enacted last year, experts say.
In 2010, the donut hole kicked in after a beneficiary had
incurred $2,530 in annual drug spending. They were then responsible
for every dollar incurred up until $6,137 in spending, at which
point "catastrophic" coverage kicked in.
However, experts say that under the new Affordable Care Act,
this coverage gap will shrink considerably beginning this year, and
completely disappear by the year 2020. But the process will be a
step-wise transition -- and that doesn't include the possibility of
Republican efforts to curtail or even dismantle the new
legislation.
The Part D drug plan "is basically the tiered system Medicare
has had for covering medications. They're gradually filling it,"
explained Dr. David Spahlinger, president of the Association of
American Medical Colleges Advisory Panel on Healthcare and senior
associate dean for clinical affairs at the University of Michigan
Medical School, Ann Arbor.
Although there are a number of plans within the program, right
now the "average" Part D beneficiary has to pay an initial
deductible of $310 for prescription medications. After that, they
have to pay 25 percent of their drug costs, with Medicare taking
care of the rest, said Hilary Sohmer Dalin, interim director of the
National Center for Benefits Outreach and Enrollment at the
National Council on Aging.
The easiest way to explain what's going to happen is to look at
a "standard plan," even though, admittedly, there are few such
plans.
In 2010, that 75 percent/25 percent payment ratio stayed in
place until seniors spent an additional $2,530 on medications.
Under that system, the senior pays $632.50 and the drug plan
$1,897.50.
So, "the coverage gap starts after a total expenditure of
$2,530," explained Dalin.
Then seniors had to pay
all of their prescription drug costs until they have racked
up another $3,607.50 in costs (to $6,137.50).
At that point, they reached "catastrophic coverage," where they
only had to pay 5 percent of drug costs with the government picking
up the rest of the tab.
But this year, discounts will apply
within the donut hole: 50 percent on brand-name drugs and 7
percent on generic drugs, explained Joe Baker, president of the
Medicare Rights Center. Funds to cover the discount on generics
will come from the federal government, while the pharmaceutical
industry is funding the 50 percent discount on brand-name
medications.
"This year, not everybody, but those with very high drug costs [i.e., those who reach the donut hole] will have a 50 percent discount on brand-name drugs in the donut hole. Before it was 0 percent," added Dalin.
According to U.S. government figures, some 4 million Medicare
beneficiaries are benefiting from the new rules with an average
savings of $800 per person. Those with more severe medical problems
can see savings of $1,775.
Of course, the 7 percent discount on generics will not help
those who mainly rely on those types of drugs to "get through and
out of the coverage gap as does the 50 percent discount on
brand-name drugs," Dalin noted.
As for more expensive brand-name medications, the Congressional
Budget Office has raised the possibility that pharmaceutical
companies may simply raise their prices to offset the discount --
something which would affect all enrollees.
"There has been some concern that pharmaceutical companies might raise prices," Dalin said. But that's still an unknown.
Still, if prices remain stable, Baker said there will be
incremental upticks in discounts until 2020, by which time the
donut hole should have shrunk away entirely.
In its place, and after the initial deductible, seniors will
continue with the same 75 percent/25 percent split until they reach
catastrophic coverage, if they ever do, Dalin said.
The whole process, "starts this year but we don't get there
until year 2020," Baker said.
More information
There's more on the upcoming Part D changes at the
National Council on Aging.